How to Start a Business in South Africa with as Little Capital as Possible

Starting your own business is difficult, more so in a country like South Africa where entrepreneurship is not actively encouraged and access to finance is extremely difficult if you don’t have existing income or assets to put up as collateral. You are going to have to start a business that requires as little capital as possible and then build it up until you have enough capital or assets.  Start with what you have and grow from there, waiting for someone to give you large amounts of money to start your “dream” business will remain just that – a dream – and you will remain poor.

The situation
In South Africa if you have a business idea no bank is going to lend you money unless you have existing income or assets to put up as collateral and you certainly cannot depend on the government. If you have a business idea that requires a moderate amount of money, you are going to have to start a business that is cheaper to start such as one that involves recycling and build up and save your money all the while living thin and use this money for your main idea. You cannot sit and home and do nothing but wait for someone to come along and give you a lot of money to start your business; it is not going to happen.

Here is how to get started with as little money as possible.

1. Service business
A service business requires literally no stock but usually requires a certain skill and some tools (and in certain cases a vehicle but don’t let this put you off if you don’t have one yet). Not only do you not need anything besides a skill, most service business requires the client pay a deposit (usually 50%) to start the job, hopefully this is enough to cover whatever materials is needed for the job. Examples of service jobs include: handy man, computer repair, chef, dent removal, writing, tyre polishing etc.

2. A product business that involves recycling
Stock is expensive to buy and hold but if your main material is waste that you can get for next to nothing then your startup cost is much, much less. Ideas include: drinking glasses made from bottles, recycling laptop batteries, braais made from washing machine drums, reselling leather offcuts, recycling tins and cans, collecting and recycling aluminum, recycling plastic bottles into rope that can be resold, make and sell leather cord and selling furniture made from wooden shipping pallets.

3. A product business not holding any stock
There is a third way to start out with very little and that is to only purchase stock once a order comes in for a product. So usually you’ll have photos and specifications of the products in the form of a manual to show to clients which they can order from. This works better from an ecommerce point of view where the model is called “drop shipping”. Where once you get the clients payment and you send the order through to your supplier to fulfil and you pocket the difference. But this is not as easy as it sounds, competition is fierce so margins are tiny and sometimes suppliers don’t have stock, leading to problems.